ABSTRACT
This chapter examines the rationale for economic diversification by identifying the conventional wisdom for the policy choice and then appraising its applicability to Russia. It explains that diversification in Russia is driven more by fears about political or regime longevity than by concerns about the sustainability of economic growth. The chapter focuses on the country's attempt to diversify its export profile through exports of civilian nuclear reactors to produce electricity. An evaluation of the strengths and challenges of diversification strategy concludes that Russia's success in diversification is hostage, to reforms that need to be implemented in the wider economic policy landscape in Russia. A key reason for the almost unequivocal support for economic diversification in resource-dependent countries concerns its role as a panacea for aspects of the so-called 'resource curse' or 'Dutch disease'. A second reason that explains the popularity of economic diversification stems from its role in reducing the volatility of growth and of state revenue in resource-dependent countries.
